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. Last Updated: 07/27/2016

Nafta Moskva Oil Trading Dries Up

Trading group Nafta Moskva, the oil-trading monopoly in Soviet times and for a time Russia's largest oil trader, is closing down crude operations for lack of barrels to lift, trading sources said Wednesday.

Some traders said Nafta's fate was sealed when Russia's private oil companies started building their own trading houses, and they predicted more failures for independent companies with no close ties with Russian or Western majors.

But others said there was still room for independent trading and explained Nafta's failure by a run of bad luck and a bid by new owners to diversify into the metals and banking business.

"It's very sad to see the shutdown of this once-powerful giant, which had the best school of trading in Russia," a former Nafta trader said. "Almost all employees received dismissal notices. A commission has been set up to liquidate the firm." A dozen other former Nafta traders, now in Russian and Western trading houses, confirmed the news.

"Nafta will probably survive as a name," said one. "But now it is clear that its oil business is closing up."

A source in Nafta Moskva confirmed major layoffs, but declined further comment.

Founded in 1937 by Josef Stalin as Soyuznefteexport, the firm had an export monopoly. In its golden age, the mid-1980s, the Soviet Union was the world's largest oil producer, with output of more than 12 million barrels per day.

Even after the 1991 collapse of communism, a privatized Nafta Moskva remained Russia's biggest oil trader, using branches in Belgium, Germany, Switzerland and in the main ports to lift crude from newly born private oil companies.

Problems emerged in the mid-1990s, when traders left Nafta for other houses or to set up their own companies. Rusoil, Nafta's branch in Germany, turned into independent Sunimex and is now the country's biggest importer of Russian crude supplies.

"Russian producers have built their own trading houses and contacts, and Nafta's business was constantly shrinking," a senior Russian trader said.

In 1999, Nafta still exported 20 million tons (400,000 bpd) of crude and products. Revenues were around $2.4 billion. "But the bulk of this crude came from [No. 3 oil producer] Surgutneftegas, and this was already a bad sign to rely on one supplier," another trader said.

Worries turned real in 2000 when Surgut sold its minority stake in Nafta and said it was looking for new trading options.

Nafta changed hands several times and last year its new owners expanded into banking, insurance and the metal sectors.

"The firm kept loading spare cargoes for another year, but oil was not a priority. The kiss of death was the departure of Surgut and a team of core traders," the trader said.

In April, Surgut started to hold tenders for its seaborne volumes, previously lifted by Nafta. Nafta's core traders left the company for a new house, Euro Petroleum.

An industry source said some players were now looking to buy Nafta's assets in Finland, a lubricant plant and some 200 Teboil petrol stations, nearly the company's last lucrative asset.